The Defense Department, NASA and the Department of Homeland Security are “diminishing” the government’s buying power with “potentially duplicative” contracts for IT services, possibly wasting large chunks of the $30 billion U.S. IT acquisition budget, according to the Government Accountability Office.
In a study released Thursday, titled “Strategic Sourcing: Opportunities Exist to Better Manage Information Technology Services Spending,” the GAO reported that the agencies manage only 10 to 44 percent of IT spending through preferred strategic sourcing contract vehicles, whereas industry leaders typically strategically source around 90 percent of IT spend.
“…most of these agencies’ efforts to strategically source IT services have not followed leading commercial practices, such as clearly defining the roles and responsibilities of the offices responsible for strategic sourcing; conducting an enterprise-wide spend analysis; monitoring the spending going through the agencies’ strategic sourcing contract vehicles; or establishing savings goals and metrics,” the report stated. “As a result, the agencies are missing opportunities to leverage their buying power and more effectively acquire IT services.”
Defined as a “process that moves an organization away from numerous individual procurements to a broader aggregate approach,” strategic sourcing necessitates practices that include close management and standardization, frontiers that government agencies have had difficulty mastering.
GAO inquiries, for example, uncovered large inconsistencies in the compensation allotted to different contractors providing similar services across agencies. An analysis of 30 IT contracts issued to NASA, DHS and DOD in 2013 indicated an average disparity of 62 percent between the highest and lowest rates for contractors doing essentially the same work. Further convoluting the process, the two contracting agents responsible had separated their workers into 117 discrete categories, each with its own payment scheme and rationale, stymieing efforts to effectively compare labor rates. The report noted that leading companies usually use standardized categories for IT labor.
With all factors considered, the GAO estimated that the agencies could be missing out on up to 15 percent in savings annually — $4.5 billion per year.
The GAO message to the agencies is clear: catch up to industry.
“To improve efforts to strategically source IT services, GAO recommends that each agency conduct spend analysis, monitor spending, develop savings goals and metrics, and consider the use of standardized labor categories, as appropriate for their agency,” the report stated.
“The agencies concurred with these recommendations,” the report states.